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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2374

Panic stricken share market on a roller coastar ride

By Quintus Perera – Asian Tribune

The market shaded approximately Rs.32 billion this week due to a combination of macro uncertainty, confusion on bonus issues under the new Companies Act, margin calls and panic selling, the HNB Stockbrokers indicated in their weekly review.

During the first four days of trading the All Share Price Index (ASPI) dropped by 181 points representing a 6.8 percent decline. However, on Friday the trend reversed with indices regaining approximately 40 percent of the lost ground during the first four days. The ASPI during this week declined by 103.8 points to close the week at 2571.5 points while the Milanka Price Index (MPI) dropped by 75 points to close the week at 3666.2 points.

The trend witnessed over the last couple of weeks where a single stock contributed a substantial percentage of market turnover, continued this week with Dialog contributing a significant 82 percent towards this week’s market turnover. On Thursday Malaysian Telecom, the parent company of Dialog, sold a 3 percent stake in Dialog for a consideration of Rs.27 per share to another foreign party.

Dialog contributed a mammoth Rs.6.39 billion towards the weekly turnover while trading within a range of Rs.26.25 and Rs.25.25. The share closed the week at Rs.26 per share, flat from last week’s closing level.

JKH took a back seat this week as the second highest contributor towards market turnover after been at the top during the last two weeks. Though overshadowed by Dialog, JKH for yet another week managed to attract substantial investor interest contributing Rs.427.5 million towards market turnover. JKH during the week traded at a high of Rs.149.50 and a low of Rs.142. The Counter closed at Rs.144.25, shedding 2.5 percent during the week.

SLT became the second telecom company to be among the first three contributors towards this week’s market turnover. SLT managed a turnover of Rs.96.5 million this week while the counter traded within a range of Rs.38.25 and Rs.34.5. The counter closed 2 percent down this week at Rs.37.

Total turnover for the week stood at a mammoth Rs.7.8 billion while average daily turnover for the week stood at Rs.1.56 billion. This week’s average daily turnover showed a significant 473 percent growth compared to Rs.272 million, recorded last week. However if the Dialog trade which too place on Thursday is disregarded the average daily turnover growth for the week stood at a marginal 7.2 percent.

Foreign investors remained net buyers this week amounting to Rs.467.5 million. Both foreign purchases and sales showed a significant growth of 702 percent and 1711 percent respectively due to the Dialog trade on Thursday, which went through as a foreign to foreign transaction. Foreign participation during the week stood at a substantial 88 percent compared to 46 percent last week.

HNB Stockbrokers meanwhile in their point of view indicted to look for bargain hunting opportunities and indicated that the market plunged by 3.88 percent during the week with many factors such as confusion over the New Companies Act’s application on bonus issues, margin calls and tension in the peace front contributing towards the downfall.

However some of the lost ground was regained during the late hours of trading on Thursday and Friday with bargain hunters trying to collect undervalued counters

BOP surplus strengthen the foreign reserves

A mix of 16 percent decline in trade deficit and a healthy growth in worker remittances resulted in an increase in Balance of Payments (BOP) to surplus of US$ 240 million during the 1st
quarter of 2007.

March exports grew by 17.7 percent to US$ 637 million backed by strong contributions from industrial exports such as textiles and garments, while agriculture exports such as rubber and coconut products also grew at a noteworthy rate.

During the month imports declined by 2.4 percent to US$ 853.7 million compared to US$ 874.6 million in March 2006, largely due to a 32.9 percent fall in petroleum imports. This resulted the trade deficit to decrease significantly by 35.1 percent to US$ 216.6 million compared to corresponding period last year.

Meanwhile during the 1st quarter of 2007 the cumulative exports and imports increased by 13 percent and 3.2 percent respectively to US$1,717 million and US$ 2,376.6 million resulting in a trade deficit of US$ 659.5 million, 15.9 percent lower than what was experienced during the 1Q of 2006.

A lower trade deficit and an increase in worker remittances by 12.4 percent to UD$ 647.7 million caused an increase in BOP to record a surplus of US$ 240 million during the 1st 3 months of 2007. Furthermore this resulted in an improvement in the country’s reserve position with gross official reserves increasing to 3.2 months of imports in March compared to 2.9 months of imports in February 2007.

In the opinion of the HNB Stockbrokers the BOP would continue to remain positive in 2007 helped by lower petroleum imports and growth expected in worker remittances, however they highlight the importance of keeping the North and East conflict under control in order to attract more foreign investments and borrowings in to the country.

Market likely to recover next week

During next week they expect the market to regain the exaggerated drop witnessed this week due to margin calls and panic selling. The HNB Stockbrokers expect activity levels to remain healthy next week as bargain hunting witnessed during the latter part of this week would likely continue during the early part of next week with interest on fundamentally strong counters such as SLT, Distilleries, Commercial Bank, HNB and Dockyards.

Thus HNB Stockbrokers advise investors to focus on these counters looking at their fundamental value while at the same time capitalizing on possible trading opportunities in the market place.

- Asian Tribune -

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